Mikhail Prokhorov’s stake in United Company RusAl will increase to 19.2 percent, instead of the planned 18.5 percent, as a result of new debt restructuring talks between the billionaire and the aluminum giant, sources close to both sides said.
Under an earlier agreement reached in March, Prokhorov’s companies agreed to convert a $2 billion debt into RusAl shares through a new emission, increasing Prokhorov’s stake from 14 percent to 18.5 percent. RusAl’s remaining debt to Prokhorov was supposed to be restructured and repaid in two tranches of $350 million, along with another $100 million in interest for deferred payments, sources close to RusAl said.
Now the two sides have agreed to reduce RusAl’s valuation for the deal to $30 billion, from $36 billion, sources at several banks told Vedomosti, citing data from the company. A source close to RusAl’s shareholders confirmed the information. Prokhorov, they said, agreed to convert a total of $1.8 billion in debt into RusAl shares, which would raise his stake to 19.16 percent after the additional share issue.
The bankers said they did not know what would happen to the rest of RusAl’s debt to Prokhorov. Two sources close to RusAl said the remainder would be restructured on approximately the same terms, and that the company had suggested this to Western banks. RusAl, majority owned by a unit of Oleg Deripaska’s Basic Element holding, already owes $7.4 billion to foreign banks.
The banks’ loans will be extended until the end of 2013 with the right to extend them for another three years, the sources close to RusAl said. The rate will depend on the company’s ratio of debt to earnings before interest, taxes, depreciation and amortization, varying from 7 percentage points above the London interbank offered rate to 3 percentage points over LIBOR. Some of the interest will compound, they said.
Since March, RusAl’s debt to Prokhorov has risen to $2.9 billion from $2.8 billion, one of Vedomosti’s sources said. Prokhorov’s companies are now seeking $200 million in interest instead of just $100 million, the source said. RusAl has continued making interest payments on its debt to the banks, even though it halted payments to Prokhorov.
A source close to RusAl said the company could pay an additional $75 million to Prokhorov’s companies as compensation for not demanding repayment of the debt. The aluminum company is also going to reward the banks for their moratorium — interest and compensation will be paid after they sign the new restructuring agreement.
Under the new restructuring terms, Prokhorov will become RusAl’s second-largest shareholder. Deripaska’s En+ holding will see its stake diluted to 53.39 percent, from 56.8 percent now. Companies connected to former SUAL shareholders Viktor Vekselberg and Len Blavatnik will have their stake reduced to 17.76 percent, from 18.9 percent, while Swiss trader Glencore’s holding will fall to 9.68 percent, from 10.3 percent.
The agreement is being approved with other RusAl creditors, and it is expected to be signed simultaneously with agreements on restructuring debts to foreign and Russian banks, including the $2 billion that RusAl owes to VTB, Sberbank and Gazprombank.
Sources close to RusAl and the banks said the signing could happen this week. Vneshekonombank has already extended its $4.5 billion loan to RusAl for another year, and the company plans to sell 10 percent of its shares in an initial public offering in December to raise about $3 billion to pay down debt.
Because of the upcoming share sale, Prokhorov has declined his option to sell his RusAl stake to the company, a source close to RusAl said.
Spokespeople for RusAl, Prokhorov’s Onexim Group holding company, Glencore and Vekselberg declined comment.
In April 2008, RusAl purchased 25 percent plus one share in Norilsk Nickel from Prokhorov. The company paid with a 14 percent stake in RusAl plus cash, including $4.5 billion that was paid immediately. Another $2.7 billion was supposed to be paid later. The first payment of $700 million was planned for November 2008, but RusAl was unable to make it.